Swin Food Services An overview of Swin Food Services finances By Chloe Garrett, Daniel Hardea and Yuelei Mao

The Value Chain SWIN FOOD FOODS R US CUSTOMER

The Value Chain SWIN FOOD FOODS R US CUSTOMER Advertising Utilities Warehouse upkeep Wages Delivery

What is a budget? Forecast revenues and expenditures Do we have enough cash? Pro forma financial statements Limitations of extrapolating

Why Budget? Encourage planning Increase dialogue between different departments

Why Budget? Control mechanism Measure performance Model scenarios

Where do accountants fit? Define budget objectives Collect data Prepare budget Review budgetReport results Monitor progress and amend if required

Preparing a cash budget Customers pay 70% in the month 20% in the month following the sale 8% in the second month after sale The remainder is bad debt. Foods R Us provide a 3% discount if Swin Food pay by the 15 th of each month. We have fixed expenses of $80,000 for the month of November and December.

Credit Sales and Purchases 70% of sales generated in the first month $126,000$115,000$105,000$136,500$140,000 20% of sales generated in the next month $0$36,000$33,000$30,000$39,000 8% of sales generated in the second month $0 $14,400$13,200$12,000 TOTAL$126,000$151,500$152,400$179,700$191,000

Credit Sales JANUARY 20% of $200,000 = $40,000 8% of $195,000 = $15,600 TOTAL = $55,600

Cash Budget Statement Flow CASH INFLOW CASH OUTFLOW CALCULATE THE DIFFERENCE NET CASH FLOWOPENING CASH FLOW CASH FLOW CARRYING FORWARD ADD NET CASH FLOW TO OPENING CASH FLOW ??????????????

Cash Budget for the period Nov-Dec 2012 AUGSEPOCTNOVDEC CASH INFLOW $126,000$151,500$152,400$179,700$191,000 CASH OUTFLOW (purchases) ($101,850)($116,400)($87,300)($130,950) CASH OUTFLOW (other) ($80,000) NET CASH FLOW $126,000$49,650$36,400$12,400($19,950) TOTAL CASH OUTFLOW ($101,850)($116,400)($167,300)($210,950)

Cash Budget AUGSEPOCTNOVDEC NET CASH FLOW $12,400($19,950) OPENING CASH FLOW BALANCE $12,000$24,400 CASH FLOW CARRYING FORWARD $24,400$4,450

Credit Purchases scenario Assumption that payment occurs in the next month What if payment occurred in same month? CASH FLOW CARRYING FORWARD ($19,250)($53,750)

Budget Analysis Test the functionality of taking deposits. Determine feasibility of using another seller. Adjustments for seasonal variation Where are we losing money?

Decisions, Decisions Closing December cash $4,450 Decrease expenses Increase sales collection What about financing options? Borrow money at current rates (6.7% p.a. # ) = monthly repayments of $786 per month over a 5 yr term Finance lease. Pay to use the car when you need it. # - current best interest rat from

Recommendations Track and compare cash inflows and outflows Model seasonal variations Highlight bottlenecks Plan for future asset acquisitions

Reference List Bazley, M. &. H. P., Contemporary Accounting. 8th ed. South Melbourne: Cengage Learning Australia.